by Allyson Cofran, Esq.

New Jersey has several collection remedies available to creditors when accounts become delinquent or in default. By using these methods such accounts may be turned into revenue.

At the outset, obtaining a personal guaranty when a contractual relationship begins can help encourage payments but also can provide additional security for post-default collection efforts. If collection efforts can only be brought against a business entity such as an LLC or corporation, collecting from these types of entities can be tricky because of their ability to close down shop quickly and because many do not have bank accounts in their respective names for possible post-judgment bank levies.

When suit is filed, the complaint must correctly identify the debtor who is legally responsible to pay the creditor, as well as all potential defendants who may be liable for the debt. Failure to name a party or to correctly name the debtor (i.e trade names) could hamper post-judgment enforcement efforts and require amending a judgment. If a personal guaranty, promissory note, or other type of agreement was entered into by a related third-party, the complaint should include them as well.

Attorneys’ fees should be demanded in the complaint and may be awarded by the court if authorized by the agreement between the parties, applicable statute or court rule. Assuming the agreement between the parties makes reference to an award of attorneys’ fees, the amount of the award will still be subject to the court’s discretion and the fees awarded will usually be limited to an amount deemed reasonable by the court based upon the services rendered.

Once the complaint is filed and served the defendant will default, file a responsive pleading or settle the claim. Once final judgment is obtained depending upon whether the action was initiated in Special Civil Part or Law Division, a judgment for money damages can serve as a lien against real estate owned by the debtor in the State of New Jersey from the time the judgment is properly recorded. A judgment entered in the Special Civil Part does not constitute an automatic statewide lien on real estate; however, it can be docketed in the Law Division and once docketed the judgment becomes a statewide lien against real estate. The lien prevents the judgment debtor from conveying clear title to the real estate without addressing the lien. The lien lasts for twenty (20) years, and may be renewed for an additional twenty (20) years if it remains unsatisfied.

A judgment creditor is permitted to garnish a judgment debtor’s wages, debts, earnings, salary, and income from trust funds or profits due to the judgment debtor. A judgment creditor may also initiate a bank levy; a personal property levy or constructive levy against property owned by the judgment debtor. This type of collection effort may involve additional costs, because to turn the property into cash requires the scheduling of an execution sale through the Sheriff’s Office and so the value of the property must be considered when using this remedy.

One effective remedy available is real property levies. First you must exhaust all personal property in the county in which the real property is located, however, this can usually be done through the use of an information subpoena which reveals that the debtor owns no property, has no job or holds no bank accounts.

By using these effective methods you can turn delinquent accounts into cash.

For more information contact Allyson Cofran at acofran@stark-stark.com.

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